CFTC Chairman Michael Selig said regulators must give financial innovation room to lead as the global derivatives market enters a new phase of development.

Selig rejects restrictive derivatives rules

Writing in The Economist, Selig argued that regulators should avoid importing or copying rules that could limit competition and prevent new financial products from reaching the market.

“The new era of finance needs innovation, not consensus,” Selig said.

Derivatives, including futures, options and swaps, allow companies, farmers, investors and financial institutions to manage risk and allocate capital. Selig placed the global notional value of those contracts above $1.2 quadrillion, with markets under CFTC supervision accounting for nearly half of the total.

The chairman said U.S. leadership developed through market competition, strong institutions, effective oversight and openness to new technology. Regulators in other countries have consequently treated the CFTC’s approach as a model for derivatives supervision.

However, Selig warned that international regulatory consensus should not become a reason for the United States to adopt restrictive frameworks. His position suggests the agency will weigh market efficiency and competitiveness alongside consumer protection when considering new products.

CFTC expands its innovation-focused agenda

Selig’s remarks extend the approach he outlined after becoming the CFTC’s 16th chairman in December 2025. In his first public address, he called for clear rules, principles-based oversight and “permissionless innovation.”

The chairman has also instructed staff to use the agency’s existing authority to modernize its regulations while Congress considers legislation that could expand the CFTC’s role in digital asset markets.

Under Project Crypto, the CFTC is working with the Securities and Exchange Commission to coordinate the treatment of products that cross traditional regulatory boundaries. Selig has said the initiative should create durable rules for crypto trading platforms and other emerging markets.

Still, the agency has said innovation will not replace its core responsibilities. In his January address, Selig identified investor protection, anti-fraud rules, market integrity and safeguards against manipulation as continuing priorities. The CFTC described the policy as an effort to modernize regulation without abandoning those principles.

Prediction markets test innovation and enforcement

Prediction markets provide an early test of that balance. Binance.US plans to apply for a designated contract market license that could allow it to list federally regulated event contracts, futures and options for retail customers.

Chief Executive Stephen Gregory disclosed the plan during the Rare Evo conference in Las Vegas. The exchange was expected to submit its application in August, although CFTC approval is not guaranteed.

A successful application would move Binance.US beyond spot cryptocurrency trading and place its event contracts under direct federal supervision. Designated contract markets must meet CFTC requirements covering system safeguards, recordkeeping, conflicts of interest and market monitoring.

Meanwhile, the regulator has continued pursuing misconduct on existing platforms. Former U.S. Representative George Santos recently settled a CFTC case involving Kalshi contracts tied to whether he would attend President Donald Trump’s State of the Union address.

The CFTC’s July 31 order required Santos to return $17,569.98 in profits, pay a $17,500 penalty and accept a three-year ban from trading on CFTC-registered markets. Santos neither admitted nor denied the agency’s findings.

What Selig’s approach means for US markets

Selig’s position could support more crypto derivatives, tokenized products and prediction contracts entering regulated U.S. venues. It may also encourage financial companies to pursue federal registration instead of launching products offshore or operating through less defined legal structures.

The key question will be how the CFTC converts its innovation-focused language into licensing decisions and formal rules. Applications from companies such as Binance.US will show how much flexibility the agency is prepared to offer while protecting retail traders and preserving market integrity.

Selig said the United States intends to remain influential in setting global derivatives standards. That leadership will depend on whether the CFTC can expand access to new products without weakening its response to fraud and manipulation.

Bitcoin miner MARA swung to a net loss of $611.3 million from a year-earlier profit in the second quarter of 2026, driven primarily by a change in the value of its Bitcoin holdings, despite reporting its highest quarterly Bitcoin production in more than a year. 

The net loss, equivalent to $1.60 per diluted share, is down compared to a net income of $808.2 million, or $1.84 per diluted share, in the second quarter of 2025, according to the company’s 10-Q SEC filing. MARA mined 2,422 Bitcoin in the quarter, 3% more than the prior year period, but higher production was more than offset by a 28% decline in the average Bitcoin price. 

“Two things defined Q2 for MARA. Bitcoin prices created a challenging revenue environment [and] we used the quarter to fundamentally transform our power portfolio and capital structure,” said MARA chief financial officer Salman Khan during an earnings call on Thursday.  

The quarter highlights MARA’s exposure to Bitcoin prices even as it expands mining capacity and pursues AI and high-performance computing infrastructure. As of June 30, MARA held a total of 35,577 Bitcoin, with a total fair value of $2.1 billion, making it the fourth-largest public Bitcoin holder after Strategy, Twenty One Capital and Metaplanet. 

MARA eyes continued AI expansion 

In February, the company acquired a majority stake in Exaion SaS, which operates high-performance computing (HPC) data centers and secure cloud and AI infrastructure.

In the same month, MARA also announced a partnership with Starwood Capital Group and its data center development platform Starwood Digital Ventures to enable the conversion of select MARA sites to meet demand from “enterprise, hyperscale and AI customers.” 

Related: Bitcoin miners’ AI pivot loses Wall Street’s wow factor 

MARA said it is targeting at least two AI/HPC lease signings by year-end. 

“Working alongside Starwood, we are progressing lease discussions across multiple sites, and we remain confident in our ability to sign at least 2 leases before year-end,” MARA CEO Fred Thiel said on Thursday. 

In July, MARA also agreed to acquire a 1,200-acre powered land site in Matagorda County, Texas, with expected access to up to 2 gigawatts of grid capacity by April 2028. The company said it intends to develop the site for AI and HPC workloads as well as Bitcoin mining. 

MARA’s expansion plans also include its pending acquisition of Long Ridge Energy & Power in Ohio, a $1.5 billion deal that MARA has said could support up to 600 megawatts of AI and critical-IT load over time.

Related: Galaxy, MARA Holdings deepen Texas expansion with land acquisitions

Bitcoin mining remains foundational

In a letter to shareholders on Thursday, Thiel said Bitcoin mining still represents the core of MARA’s business and will continue to generate cash flow that supports its other investments. 

“Ultimately, we do not view Bitcoin mining and AI infrastructure as competing businesses,” said Thiel.

“Our capital allocation philosophy remains straightforward. Every megawatt should be deployed into its highest-value application. In some markets, that will continue to be Bitcoin mining. In others, it will be AI infrastructure, sovereign cloud, or enterprise computing.”

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The U.S. Senate will not vote on the crypto market structure bill before it breaks for the rest of the month, but industry leaders still hope for a vote in September, when the Senate returns to Washington, D.C., multiple individuals following the legislation told CoinDesk.

The crypto industry hoped that the Senate would stay in session for a few more days to resolve outstanding issues, including the Digital Asset Market Clarity Act, but Senators from both parties had major unresolved issues on the legislation. The Senate will return to D.C. on Sept. 14, 2026, and will have three weeks to work on this and other outstanding issues then.

The Senate will hold votes on a continuing resolution to fund the federal government through the midterm election; a Russia sanctions bill championed by and now named after Senator Lindsey Graham and a group of nominations on Friday morning, the last day before it is scheduled to leave.

Politico first reported late Thursday that the Senate did not expect to hold a first vote on Clarity before the recess.

ElizaOS fell 19% over 24 hours to an all-time low after Eliza Labs founder Shaw Walters said the token was “dead” and that the Eliza Foundation was winding down. 

CoinGecko data showed the token trading at $0.000285 at the time of writing after touching a record low of $0.000284 on Thursday with a market capitalization of $2.1 million.

The drop came after an announcement from Walters that the foundation was winding down. “The token is dead. Completely,” Walters said, adding that he no longer owned or supported the token. He said the development of the open-source Eliza software would continue without the token or the foundation. 

The decline represents a stark reversal for one of the AI-agent sector’s former breakout tokens. Before the project rebranded as ElizaOS, the token, then known as AI16Z, reached a peak market capitalization of $2.5 billion in January 2025, according to CoinGecko.

ElizaOS’ 24-hour price chart. Source: CoinGecko

Founder blames lawsuit and token culture

Walters said Eliza Labs privately settled with a group of tokenholders represented by Burwick Law by agreeing to give them its remaining treasury and funds.

He called the suit “ridiculous” but said the project lacked the capital to continue fighting it. 

The lawsuit, filed in April, named Eliza Labs, Walters, Sebastian Quinn-Watson and the AI16Z DAO as defendants. It alleged false advertising, deceptive practices, negligent misrepresentation and unjust enrichment.

Court records show the named plaintiff’s claims were dismissed with prejudice by stipulation on July 8, while the proposed class’s claims were dismissed without prejudice.

Cointelegraph contacted Walters and Burwick Law founder Max Burwick for comment but had not received a response by the time of publication. 

Related: Not every AI agent needs its own cryptocurrency: CZ

Walters said there were no more funds for token buybacks and no foundation or future supply intervention to support the token. 

He also said he would not allow another token to be associated with Eliza while continuing to build its underlying operating system. 

“I am starting over, since I own the IP, and I am never letting a token come close to Eliza again […] I’m never going to support an Eliza token,” he wrote. 

ElizaOS is an open-source framework for building and managing AI agents. The project launched in October 2024 as ai16z with an initial goal of raising $75,000 to build an autonomous investor. 

In January 2025, it rebranded to ElizaOS after Andreessen Horowitz raised concerns about confusion with its a16z brand. The token was also later migrated. 

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XRP ETF inflows have surpassed $1.51 billion as investors increasingly explore UE Crypto’s cloud mining and yield strategies for long-term participation.

Wall Street’s increasingly bullish outlook on XRP ETFs is fueling a new wave of market optimism, with total inflows expected to exceed $1.51 billion.

At the same time, a growing number of investors are exploring alternative digital asset strategies, including cloud mining and crypto yield platforms, in pursuit of more stable long-term returns while continuing to hold digital assets. This trend is also driving greater interest in XRP ETFs.

ETF products backed by XRP have recently reached another significant milestone in capital inflows, further strengthening institutional confidence in the asset.

Meanwhile, more investors are turning their attention to the crypto market, seeking long-term income opportunities beyond simply waiting for the price of XRP to appreciate.

The continued inflow of capital into XRP ETFs highlights the growing institutional demand for XRP. Although many retail investors remain cautious due to market volatility and price uncertainty, institutional funds continue allocating capital to XRP through regulated financial products, making it one of the most closely watched mainstream digital assets.

As the regulatory environment continues to improve and financing conditions become more favorable, more investors are asking an important question: Is there a more efficient and sustainable way to benefit from XRP beyond simply waiting for its price to rise?

XRP ETF inflows surpass $1.51 billion, reaching a major milestone

Since the close of trading on August 1, cumulative inflows into XRP-related exchange-traded funds (ETFs) have exceeded $1.51 billion, according to data released by market analysis platform uToday, marking another significant milestone driven by sustained net inflows.

At the same time, overall market liquidity continues to improve. Although trading activity in the secondary market has slowed somewhat and retail investor sentiment remains relatively cautious, institutional demand has stayed strong, resulting in net inflows on most trading days.

A new opportunity for XRP investors: UE crypto’s long-term income strategy

Against this backdrop, an increasing number of XRP investors are turning to UE Crypto, leveraging its cloud mining and yield aggregation mechanisms to pursue a more stable and sustainable digital asset income model.

Compared with highly volatile futures trading or ETF investing, UE Crypto offers a more straightforward and accessible way to participate in the digital asset market while improving the efficiency of digital asset utilization as users benefit from the continued growth of the XRP ecosystem.

For investors with a certain level of capital, this model offers the potential to generate more consistent daily returns, providing an alternative approach to long-term digital asset allocation.

About UE Crypto

Headquartered in the United Kingdom, UE Crypto operates under European regulatory frameworks such as MiCA and MiFID II, continuously enhancing platform transparency, operational standards, and user protection.

The platform employs a multi-layer security architecture, including:

• Annual financial and security compliance audits by PwC;
• Digital asset custody insurance provided by Lloyd’s of London;
• Enterprise-grade cybersecurity protection from Cloudflare and McAfee® security systems;
• Bank-grade encryption technology combined with professional security infrastructure to comprehensively safeguard user assets and accounts.

UE Crypto currently supports a wide range of mainstream digital assets, including XRP, BTC, ETH, USDT, USDC, DOGE, LTC, and SOL, providing users with a flexible and efficient digital asset service experience.

Start earning daily rewards in three simple steps

Step 1: Register an account

Visit the official UE Crypto website and register with an email address to receive a $20 trial reward.

Step 2: Choose a mining plan

Select a cloud mining contract that best fits a particular investment budget and objectives, then start mining with just one click.

Step 3: Start earning

Once a contract is activated, computing power is automatically allocated, and rewards are settled every 24 hours. Users can withdraw earnings at any time or continue participating to benefit from long-term compound growth.

Popular cloud mining contract examples

BTC (beginner trial plan)

• Investment: $100
• Contract Term: 2 Days
• Daily Reward: $4
• Total Return: $100 + $8

DOGE (digital intelligent system plan)

• Investment: $500
• Contract Term: 5 Days
• Daily Reward: $6.25
• Total Return: $500 + $31.25

BTC (super computing system plan)

• Investment: $1,000
• Contract Term: 10 Days
• Daily Reward: $13.10
• Total Return: $1,000 + $131

LTC (algorithm-driven system plan)

• Investment: $5,000
• Contract Term: 25 Days
• Daily Reward: $72
• Total Return: $5,000 + $1,800

BTC (quantitative intelligent system plan)

• Investment: $10,000
• Contract Term: 35 Days
• Daily Reward: $158
• Total Return: $10,000 + $5,530

For more information about available contracts, please visit the official UE Crypto website.

Conclusion

The continued inflow of capital into XRP ETFs, together with ongoing improvements in the regulatory environment, reflects XRP’s steady integration into the mainstream financial system.

At the same time, UE Crypto offers XRP investors a more diversified way to participate in the digital asset economy, shifting from relying solely on price appreciation toward a strategy that combines capital growth with continuous passive income.

As the next market cycle unfolds, investors are increasingly focusing not only on price movements but also on more stable and sustainable wealth management strategies. This trend reflects the continued maturation of the digital asset investment landscape.

Join UE Crypto today and start earning passive daily income through digital assets.

Senator Elizabeth Warren supports establishing federal rules for digital assets but has rejected the CLARITY Act in its current form, citing unresolved concerns over corruption, consumer protection, national security and financial stability.

Warren says CLARITY Act falls short

According to CoinDesk, Warren said the U.S. crypto industry needs a clear regulatory framework but argued that the current proposal does not adequately protect investors or the wider financial system.

The Massachusetts Democrat identified several areas where she believes the legislation remains insufficient. These include safeguards against political corruption, protections for consumers and measures intended to limit national security and economic risks.

Warren has also warned that poorly designed crypto legislation could weaken regulators and allow large digital asset companies to exploit gaps between federal agencies. Her opposition therefore focuses on the terms of the CLARITY Act rather than rejecting crypto regulation altogether.

The bill seeks to establish clearer federal oversight of digital asset issuance, trading platforms and other market participants. It would also define how responsibilities are divided among agencies, including the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Supporters argue that those rules would reduce legal uncertainty for U.S. crypto businesses. Warren, however, maintains that regulatory clarity must not come at the expense of consumer safeguards or financial stability.

Trump’s crypto income adds to ethics dispute

Warren’s position follows her earlier scrutiny of President Donald Trump’s digital asset interests while lawmakers considered the market structure bill.

As crypto.news reported in July, Warren asked Trump to disclose his crypto earnings between Jan. 1 and July 15, 2026. The request followed a federal financial filing that showed approximately $1.4 billion in income from digital asset ventures during 2025.

Trump’s disclosure, filed June 30 under Office of Government Ethics rules, listed income connected to Official Trump and World Liberty Financial, the Trump family’s crypto business.

Warren argued that those holdings raised questions about whether senior elected officials could influence legislation that affects the value of their own assets. She asked Trump to provide the additional information voluntarily by July 23.

Conflict-of-interest restrictions involving senior federal officials have since remained among the largest obstacles in CLARITY Act negotiations. Lawmakers have also discussed illicit finance provisions, decentralized finance oversight, stablecoin rewards and the scope of the CFTC’s authority.

CLARITY Act misses path to weekend vote

Prospects for an immediate Senate vote faded Thursday after Majority Leader John Thune did not file cloture on a motion to proceed to the bill.

A cloture filing would begin the procedural countdown needed to limit debate and bring the legislation toward floor consideration. Without it, a weekend vote became increasingly difficult even if senators remained in Washington beyond Friday.

Thune instead filed cloture on a substitute amendment to H.R. 6500, the motion to proceed to the Protect College Sports Act of 2026 and Todd Blanche’s nomination to be attorney general.

The CLARITY Act was absent from the list despite continued negotiations among Republicans, Democrats and the White House.

Prediction markets cut 2026 passage odds

Prediction-market traders have become increasingly doubtful that Congress will approve the legislation this year.

Polymarket placed the probability of the CLARITY Act being signed into law in 2026 at approximately 17% on Thursday, representing a 48% decline over the measured period.

Warren’s opposition adds to the challenge facing Senate leaders, who need Democratic support to overcome the chamber’s 60-vote threshold. Further movement will depend on whether negotiators can reach agreements on ethics, consumer protection, illicit finance and agency authority before lawmakers leave for the August recess.

Circle stock gained on Thursday after Bernstein reiterated its Outperform rating and $140 target, arguing that the stablecoin issuer’s mixed second-quarter results challenged the bearish case against the company.

Bernstein argues Circle’s results challenge bears

Bernstein analysts led by Gautam Chhugani described Circle’s second-quarter report as a “counter thesis to the bears,” according to a Thursday note to clients.

The brokerage retained its Outperform rating and $140 price target. The target is more than double Circle’s Thursday price of $65.29, although Bernstein had previously lowered it from $190 in late July.

Circle reported $701 million in total revenue and reserve income, a 7% increase from the same period last year. The figure missed consensus estimates by about 2%, contributing to the mixed assessment of the quarter.

Profitability was stronger. Adjusted EBITDA rose 8% year over year to $143 million, while basic earnings per share of $0.19 exceeded expectations. Net income from continuing operations reached $48 million, improving by $530 million from the previous year’s loss, which included expenses tied to Circle’s initial public offering.

Reserve income still generated roughly 95% of total revenue, leaving Circle exposed to changes in US interest rates. A lower federal funds rate would reduce the returns the company earns on assets backing USDC.

USDC growth supports the long-term thesis

USDC circulation ended the quarter at $73.3 billion. That represented 19% annual growth but a 5% decline from the $77 billion reported at the end of the first quarter.

Onchain transaction volume reached $14.8 trillion during the quarter, up 151% year over year, according to Circle’s earnings report. The figures suggest network activity grew faster than the amount of USDC in circulation.

Bernstein argued that concerns about stablecoin competition underestimate Circle’s distribution, liquidity, and regulatory advantages. The analysts expect USDC adoption to expand beyond cryptocurrency trading into payments, tokenized real-world assets, and institutional financial infrastructure.

Circle also received final approval from the US Office of the Comptroller of the Currency to establish Circle National Trust. The federal trust bank charter places part of the company’s infrastructure under direct US oversight and could eventually allow the entity to manage USDC reserves.

Arc could reduce Circle’s reliance on reserve income

Bernstein identified Circle’s Arc blockchain and payments partnerships as possible sources of revenue outside interest earned on USDC reserves.

Circle plans to launch Arc’s public mainnet on Sept. 16. BlackRock, DTCC, Galaxy, Global Payments, ICE, Mastercard, MoneyGram, SBI Group, Standard Chartered, Sumitomo Corporation, and Visa will serve as founding validators, according to Circle’s announcement.

Management raised its 2026 forecast for other revenue and its revenue-less-distribution-cost margin. The revised outlook includes the expected recognition of $180 million from an Arc token presale.

Bernstein said current forward estimates may not fully account for prospective Arc staking income, gas fees, transaction revenue, and partnership activity. Those sources could help diversify Circle’s business, but their contribution will depend on adoption after the mainnet launch.

Circle stock faces resistance near $70

CRCL rose 3.18% to $65.29 on Thursday after trading between $60.01 and $65.91. The stock moved above the midpoint of its daily Bollinger Bands at $63.84, indicating that short-term momentum had improved.

The relative strength index rose to 47.9, up from its moving average of 44. The reading remains below the neutral 50 level, meaning buyers have not yet established firm control.

Immediate resistance sits between $68.80 and $70. A daily close above that range could support a broader recovery, while failure to hold $60 would expose the lower Bollinger Band near $58.87.

Despite Thursday’s advance, Circle remains in a broader downtrend after falling from above $130 in May. Bernstein’s $140 target therefore depends on Circle restoring USDC growth, launching Arc successfully, and developing revenue sources less sensitive to US interest rates.

Real-world assets (RWAs) are gaining momentum as tokenized versions of traditional investments move beyond issuance and become active parts of onchain financial markets.

RWA deposits across decentralized finance platforms more than tripled year over year to $7.4 billion in the second quarter of 2026, while total DeFi deposits fell about 15%, according to a joint report by CoinShares and Token Terminal published Thursday.

CoinShares CEO Jean-Marie Mognetti said the divergence shows that RWA demand is being driven by practical use cases rather than broader market conditions.

“When an asset class grows through a downturn in its host ecosystem, demand is being driven by financial utility, not by market cycles,” he said.

The report suggested that the RWA market is entering a new phase, with investors using them as collateral, yield-generating instruments and trading products across onchain markets.

Yield-bearing stablecoins and Treasuries lead RWA deposits

Yield-bearing stablecoins and tokenized Treasury products have emerged as the largest categories of RWA assets used across DeFi, according to the report.

In Q2, Sky Protocol’s sUSDS led the category, giving holders exposure to a yield-generating version of its USDS stablecoin.

Tokenized Treasury funds, including BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), have also become a major source of onchain collateral, as investors use yield-bearing assets in decentralized lending markets.

Source: CoinShares, Token Terminal

The report said that RWA products currently offer yields ranging from about 3.2% to 5.5%, with lower-risk Treasury products at the bottom of the range and higher-yield strategies carrying additional risks.

Gold and yield-bearing dollars drive RWA volumes

Gold-backed tokens and yield-bearing dollar products accounted for much of the RWA trading activity on decentralized exchanges (DEXs).

CoinShares classified gold-backed stablecoins such as Tether Gold (XAUt) and Paxos Gold (PAXG) as tokenized gold products within its broader RWA category.

Related: Gold hits 6-week highs on China demand as Bitcoin ignores fresh S&P 500 record

These assets generated significant trading volume as investors traded around gold price swings, while yield-bearing dollar products such as Ethena’s sUSDe also contributed to RWA spot activity.

Source: CoinShares, Token Terminal

RWA spot trading volumes rose roughly 220% year over year, even as overall DEX volumes fell about 70%. The divergence suggests tokenized assets are gaining traction as secondary markets, allowing investors to trade ownership rather than only buy assets directly from issuers.

RWAs expand into leveraged markets

Onchain exposure to RWAs is also expanding into derivatives markets, where traders can take leveraged positions without owning the underlying assets.

RWA perpetual futures trading has continued growing despite a broader slowdown in crypto-native derivatives markets. On tradeXYZ, an RWA-focused perpetual futures platform built on Hyperliquid, trading volume has increased roughly 20 times since launch, the report said.

Activity has concentrated around commodities, equity indexes such as the S&P 500 and Nasdaq-100, and technology stocks, while open interest has also continued rising.

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Basis trading is a market-neutral strategy that profits from the price gap between spot Bitcoin and its futures contracts. It is the reason hedge funds hold billions in Bitcoin ETFs without betting on the price going up.

The most widely repeated misunderstanding about Bitcoin ETF inflows is that they represent bullish bets on the price. Many of them do. But a significant share of the billions flowing into spot Bitcoin ETFs comes from hedge funds and trading firms that are completely indifferent to whether Bitcoin goes up or down. They are running basis trades, and the only number they care about is the spread between spot and futures.

This guide explains how the trade works mechanically, why crypto markets offer higher basis yields than traditional commodities, what risks the strategy carries, and how to evaluate whether the current basis is worth capturing. Understanding the basis trade is also essential for interpreting ETF flow data, futures open interest, and funding rate charts, because each of these metrics is heavily influenced by basis trading activity that is often misread as directional conviction.

How the basis trade works step by step

The mechanics are straightforward once the terminology is clear. A basis trade requires two simultaneous positions: a long position in the spot market and a short position in the futures market for the same asset and the same notional amount.

Step one: the trader buys $1 million worth of Bitcoin at the current spot price. In the ETF era, this typically means purchasing shares of a spot Bitcoin ETF such as BlackRock IBIT or Fidelity FBTC, which track Bitcoin’s price through direct holdings of the asset. The spot ETF creation and redemption mechanism ensures that ETF shares trade close to the net asset value of the underlying Bitcoin.

Step two: the trader simultaneously sells $1 million worth of Bitcoin futures on a regulated exchange, most commonly the CME. The futures contract will expire on a set date, typically monthly or quarterly.

Step three: the trader holds both positions until the futures contract expires. At expiration, the futures price converges with the spot price by definition, because the contract settles against the actual spot price. The difference between the price at which the futures were sold and the price at which they converge is the trader’s profit.

If Bitcoin was trading at $100,000 spot and the one-month futures contract was trading at $101,500, the basis is $1,500 or 1.5% for one month. Annualized, that is approximately 18%. The trader collects that 1.5% regardless of whether Bitcoin finishes the month at $80,000 or $120,000, because the gains on one leg offset the losses on the other.

Why crypto basis is higher than traditional markets

In traditional commodity markets, the basis on oil, gold, or agricultural futures typically runs between 1% and 5% annualized. In crypto markets, the annualized basis has historically ranged from 5% to more than 25%, with spikes above 40% during periods of extreme bullish sentiment. During the bull run of late 2024 and early 2025, the CME Bitcoin front-month basis routinely exceeded 15% annualized, a yield that no comparable fixed-income instrument could match at the time.

The reason is structural. Crypto futures markets are dominated by leveraged speculators who want long exposure without holding the underlying asset. This persistent demand for long futures pushes the futures price above the spot price, creating what traders call contango. The steeper the contango, the wider the basis, and the more profitable the cash-and-carry trade becomes.

Three factors keep crypto basis elevated compared to traditional markets. First, crypto markets trade around the clock every day of the year, which means funding costs and leverage demand never pause. The New York Mercantile Exchange closes on weekends. Binance and Bybit do not. Continuous trading means continuous demand for leverage, which translates to a persistently elevated premium on futures.

Second, the margining requirements on crypto futures are higher than on traditional commodity futures, which means the cost of maintaining leveraged positions is higher, and that cost gets priced into the futures premium. CME Bitcoin futures require initial margin around 40%, compared to roughly 5% to 10% for crude oil or gold. The higher the margin requirement, the more capital a leveraged long must deploy, and the more premium they are willing to accept.

Third, retail participation in crypto futures is proportionally larger than in traditional markets, and retail traders tend to be net long and willing to pay higher premiums for leveraged upside. On offshore exchanges, it is common to see 50x or 100x leverage on Bitcoin perpetual contracts. These highly leveraged longs create enormous demand for the other side of the trade, and the basis is the price the market pays to satisfy that demand.

The perpetual futures funding rate is a related concept. Perpetual contracts do not expire, so there is no natural convergence date. Instead, exchanges use a funding rate mechanism where longs pay shorts (or vice versa) every eight hours to keep the perp price anchored to spot. When funding rates are positive and elevated, it signals the same demand imbalance that drives the basis on dated futures. During sustained bull markets, cumulative funding payments can exceed 30% annualized, making the perp funding trade even more lucrative than the dated futures version.

The ETF basis trade: how institutions do it

Before spot Bitcoin ETFs launched in January 2024, running a basis trade required holding actual Bitcoin on an exchange or with a custodian. This introduced counterparty risk, custody complexity, and regulatory ambiguity that kept most institutional capital away.

The ETF changed the calculation entirely. A hedge fund can now buy IBIT shares through a prime broker, short CME Bitcoin futures through the same prime broker, and report both positions on a single balance sheet with no direct crypto custody. The trade settles in dollars, clears through regulated infrastructure, and fits within existing risk frameworks.

SEC 13F filings have revealed the scale of this activity. Millennium Management, Citadel, Point72, and dozens of other multi-strategy hedge funds disclosed large IBIT positions alongside corresponding CME futures shorts. These are not Bitcoin bulls. They are arbitrageurs harvesting the basis, and their ETF flow activity creates the paradox of billions in ETF inflows that carry zero directional conviction.

The institutional version of the trade typically targets annualized returns of 8% to 15% with minimal drawdown risk. For a fund that can borrow at 5%, a 12% annualized basis produces 7% of alpha on what is effectively a market-neutral position. At institutional scale, that is an attractive risk-adjusted return.

The scale of institutional basis trading explains a pattern that confuses many retail observers. ETF inflows can surge on a day when Bitcoin’s price barely moves, and they can remain strong during periods of sideways trading. This happens because basis traders are responding to futures premium levels, not to price direction. A widening basis attracts more capital into the trade regardless of whether Bitcoin is trending up, down, or sideways. Conversely, when the basis compresses below the cost of capital, institutional ETF flows can dry up even during a rally, because the arbitrage no longer pays.

The perpetual funding rate trade

The dated futures basis trade has a cousin: the perpetual funding rate trade. Instead of buying spot and shorting a dated future, the trader buys spot and shorts a perpetual contract on a crypto exchange such as Binance, Bybit, or Hyperliquid.

The profit mechanism is different. There is no expiration date and no convergence event. Instead, the trader collects funding payments every eight hours when the funding rate is positive. Positive funding means longs are paying shorts, which means the trader holding the short perp leg receives payments continuously.

The advantage of the funding rate trade is flexibility. The trader can enter and exit at any time without waiting for contract expiration. The disadvantage is unpredictability. Funding rates can turn negative during bearish periods, at which point the short leg starts costing money instead of earning it. The trader must monitor rates actively and be prepared to unwind when the trade stops paying.

The funding rate version also carries higher counterparty risk because it typically involves unregulated offshore exchanges. The CME basis trade, by contrast, clears through a regulated clearinghouse, which is why institutional capital overwhelmingly prefers the dated futures version.

A hybrid approach exists for traders who want the flexibility of perpetuals with reduced counterparty risk. Some traders hold their spot leg in a self-custodied wallet or on a regulated exchange and run the short perp leg on a decentralized perpetual exchange such as Hyperliquid or dYdX. The smart contract handles margin and settlement without an intermediary, which removes the centralized exchange failure risk. The tradeoff is that decentralized perp venues sometimes have lower liquidity and wider spreads than their centralized counterparts, which increases execution costs.

The arithmetic: when the trade pays and when it does not

The profitability of a basis trade depends on four numbers: the current basis spread, the cost of capital, the margin requirements, and the holding period.

Consider a concrete example. Bitcoin spot is at $100,000. The three-month CME futures contract trades at $104,000. The annualized basis is approximately 16%. The trader buys $10 million in IBIT shares and shorts $10 million in CME futures.

If the trader’s cost of capital is 5% (prime broker financing), the net yield is 11% annualized. Over three months, that produces approximately $275,000 in profit on $10 million of notional, with near-zero directional risk.

But the arithmetic changes if the basis compresses. If Bitcoin enters a bearish period and futures flip to backwardation (futures below spot), there is no basis to capture and the trade produces a loss. Historically, crypto futures have been in contango approximately 85% of the time, which is why the trade has been consistently profitable over multi-year periods.

The arithmetic also changes with margin. CME Bitcoin futures require initial margin of roughly 40% of notional. If Bitcoin rallies sharply, the short futures leg generates unrealized losses that require additional margin. A 20% rally on a $10 million short futures position creates $2 million in margin calls. The trader must have sufficient liquidity to meet those calls without unwinding the position, because unwinding the short leg while keeping the long leg converts a market-neutral trade into a directional long that may then reverse.

This margin dynamic is the single most common cause of basis trade failure. During the rally from $60,000 to $73,000 in March 2024, several smaller funds were forced to close their short futures legs because they could not meet margin calls. Their IBIT positions, no longer hedged, became naked longs at exactly the moment the rally paused and reversed. The trade that was designed to be market neutral became a directional loss because the fund did not hold enough reserve capital to survive the short-term drawdown on the short leg.

Roll cost is another factor that reduces realized returns. When a dated futures contract approaches expiration, the trader must close the expiring short and open a new short in the next contract month. This roll carries transaction costs, including commissions, the bid-ask spread on both the closing and opening legs, and potential slippage if the roll happens during a volatile session. For quarterly rolls on CME Bitcoin futures, these costs typically consume 0.1% to 0.3% of notional per roll, which can reduce the annualized yield by one to two percentage points.

What this does not cover

This guide does not cover crypto arbitrage strategies beyond the cash-and-carry trade, such as triangular arbitrage, cross-exchange arbitrage, or statistical arbitrage. It does not cover options-based strategies that use the basis as an input, such as calendar spreads or volatility arbitrage. It does not cover the tax treatment of basis trades, which varies significantly by jurisdiction and depends on whether the spot leg is held as a security (ETF shares) or as property (direct cryptocurrency). It does not explain how to execute the trade on specific platforms, because execution details vary by exchange and broker and change frequently.

Practical checks before entering a basis trade

Check the current annualized basis. Platforms such as Coinglass, Laevitas, and The Block publish real-time annualized basis for CME and major exchange futures. If the annualized basis is below your cost of capital, the trade does not pay.

Check open interest on the contract you plan to short. Low open interest means the contract is illiquid, which widens the bid-ask spread and increases the cost of entry and exit. CME Bitcoin front-month contracts typically have sufficient liquidity for institutional-sized trades. Back-month contracts may not.

Check your margin buffer. Calculate the maximum drawdown your short leg can sustain before triggering a margin call. A common rule of thumb is to hold enough reserve capital to absorb a 30% to 40% rally without needing to unwind. If you cannot meet margin calls in a rally, the trade can turn from market-neutral to forced liquidation.

Check the funding rate if using perpetual contracts. Look at the 30-day average funding rate, not the current snapshot. A single elevated snapshot can be an anomaly. The 30-day average tells you whether the trade is structurally paying.

Check counterparty risk. On CME, your counterparty risk is the clearinghouse. On an offshore exchange, your counterparty risk is the exchange itself. If the exchange goes down, your short leg disappears and you are left with a naked long position in a potentially falling market.

Disclaimer

This article is for informational purposes only and does not constitute financial, investment, or trading advice. Basis trading involves risks including margin calls, counterparty default, and potential loss of capital. Past performance of basis spreads does not guarantee future results. Always conduct your own research and consult a qualified financial advisor before making investment decisions. Information accurate as of August 6, 2026.